Throughout my hedge fund career I have been willing to make bold moves. More than 2yrs ago I setup the Sefirot Freestyle strategy to outperform the S&P500 on a risk adjusted basis.
We are basically 8yrs in on a smoking hot bull market that has to my mind reached dangerous levels of exuberance. I am not sure exactly the size of the rally since The Donald was elected in November but it is probably up 15% plus maybe 20% since then. The markets simply loving the promises that are being made to grow the economy.
My intention when setting up this strategy was not to short the market. Rather to step aside and let the market do what it must. This mandate served me well over the past year as I probably would have been my typical early self and been short way too early. I got lucky and missed the bulk of the rally but never got really badly hurt and it turns out I have still outperformed the S&P500 on a risk adjusted basis.
The problem is I have never been the type of guy who gets overly excited with strong relative performance at the end of the day the objective is to make money in absolute terms. When I look at the financial / economic landscape and see the euphoria in the market place, coming from reckless monetary policy and soon to be reckless fiscal stimulus all the while ignoring the shadow material (i.e. the indebtedness) then I feel it is incumbent to be bold and test my theory of the market complex with all its might.
Buying 200 SDOW an inverse Dow30 x3 ETF at the market open on the 2nd and getting on the opposite side of this runaway train heading for a crash.
I know I am in the minority when I say that the world finances are on the brink of a major sea change.
Of course the world sees only new high’s on the stock exchange, record highs in the real estate market, commodity prices once again surging.
Me on the other hand as a student of the collective unconscious and the market complex specifically, see something I have never seen in my life time and I believe the unpredictable nature of this complex fighting its way to the surface is likely to unleash an equilibrium balancing shift that will be shocking to say the least.
Symbolism is currently at its richest. We have this archetypal figure in Trump who is trying to portray himself as a saviour of biblical proportions. But for all his bluster in my opinion he is more symbolic of a shadow projection of a major segment of society who is tired of the status quo, who is tired of political correctness. For those who understand the shadow in all its unbridled “darkness” will see how badly this side of our psyche needs to be expressed. It is quite informative how so many of the people who vote and support Trump are scared, embarrassed or shy to say so. The reason is because the complex masked behind these feelings that have not been integrated into our Psyche are gaining so much energy (libido) that it is clear they can no longer be suppressed.
At the open of the market Buy 25 VXX and 75 WDTI for the Sefirot Freestyle fund.
It has been some time since we have done anything to the portfolio. We will buy 75 SPY @ the market open on 21 Jan.
The portfolio is doing really well having side-stepped the latest bout of volatility. We have no plan on getting too constructive on the portfolio. However, given the recent selloff there is some scope for a bounce of some nature to develop.
Reminder: the funds goal is to outperform the S&P500 on a risk adjusted basis.
This table has all you need to know to have a handle on what happened last year.
For me today is the last day of the year as I write this note at my hotel in Los Angeles before boarding a flight tonight that will cross the dateline and see me miss New Years Eve, i.e. we leave on the 30th and arrive in Sydney on the 1st.
Here is a summary of the Sefirot Freestyle Funds performance since inception on 23 December 2014. The fund has essentially side stepped the volatility of the broader S&P500 and more or less delivered the same nominal performance. For me 2015 was frustrating but I still maintain we are due further dislocations in the market and I intend to be on the sidelines during this time.
It has been way too long since I posted here, however I am currently involved in a love affair with Twitter. I have decided to simply go with the flow and not fight too hard as I know my infatuation will fade and I will find the will and time to spend a reasonable amount of time putting some thoughts down in a more coherent fashion.
To the point of this post, I am super proud of the way the portfolio is performing. I have managed to sidestep most of the current volatility. I was hoping to get a little long the market following a further washout. I don’t think it is over yet, but this bounce may continue some. I remain wary of the markets from both a valuation and Minsky instability moment.
Here is a picture of my handiwork.
Wow August was a pretty volatile month. In fact I believe the VIX recorded the largest 5 day % move in its 25yr history.
I am really happy with the way the Sefirot Freestyle portfolio performed and I am sure we will see continued outperformance during these choppy times.